After last week's sharp fall, the oil price is showing signs of recovery. After the news from the European Central Bank (ECB) that interest rates will be raised in steps of 25 basis points for the time being, the oil price rose by no less than 7%. The diesel price also fell substantially higher after the news for the first time in a long time. Still, the pace of the rise was quickly dampened by news from China.
On Thursday, May 4, the price of Brent oil was at its lowest point of the week, at $72,50. Until Tuesday, May 9, the oil price rose to $77,44, and then stagnated.
Due to recession fears in the United States and disappointing economic results, the Brent benchmark lost about 11% of its value last week. With an increase of more than 7%, most of the loss has been recovered. The large increase on Thursday 4 and Friday 5 May followed the news that the European Central Bank (ECB) has decided to increase interest rates in smaller steps. At the same time as the announcement, the EVB implemented an interest rate increase of only 25 points (0,25 percentage points). The decision came as a surprise to analysts. Because interest rates in the euro zone, at 4%, are not yet at the level of US interest rates (5,25%), analysts expected that it would take some time before the ECB would take smaller steps.
In addition, the ECB expressed its belief that steps of 25 basis points in the future will be sufficient to bring inflation back to the desired level in the long term. It seems that the ECB is slowly but surely starting to balance out its aggressive interest rate policy. While the ECB has so far opted to eradicate high inflation at all costs, the central bank appears to be slowly but surely seeking a balance that spares the economy. This is good news for the oil market, as the economic malaise is having a major impact on oil consumption in both transport and industry.
Trade data slows rise
Since Monday, May 8, the increase in oil prices appears to have slowed considerably. Oil consumption was lower than expected in both the United States and China. News reports on the American markets balanced each other out. According to the US Energy Agency (EIA), fuel supplies have shrunk by 3,2 million barrels. This means that the week's consumption appears to be higher than anticipated. The agency forecast a decline of only 1,2 million barrels. However, the market does not yet appear to be committed to higher consumption, because refining is lagging behind. Crude oil inventories rose by 3 million barrels last week, while the agency forecast a decline of 900.000 barrels.
In addition, China is being viewed with suspicion. Trade data from the Chinese government shows that the Asian country's oil imports have fallen by 16% compared to March. The result confirms analysts' fears about a sluggish Chinese industry. Earlier, Chinese industry growth turned out to be lower than expected at 3%.
The diesel price responds with a slight delay to the ECB's policy change. On Thursday, May 4, the diesel price was at its lowest point since August 2021. Large lots of diesel (from 4.000 liters) were traded for €106,71 that day. From Thursday, May 7, the diesel price increased by more than €3,50. On Wednesday, May 10, the diesel price was €110,34.